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December 13, 2008
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There have been many methods developed over the years for measuring the level of negative sentiment in the investor community. Some are based on statistics derived from economic and financial indexes such as a 40% loss in the S& P 500 or a 35% Loss in the DOW over a measure time limit. While others methods are produced from less scientific observations such as the opinions of the American consumer on his like or dislike on how the country is running.
Certainly the legacy loss measurements, referenced above, have been stratified in the recent downturns of the S & P and Dow, so much for the stats. The October 7, 2008 Gallop Poll indicated an all time low for Americans satisfied with how things are going. The poll showed only 9% percent of Americans were satisfied with how things were going. So that put 91% of us in the nattering nabobs camp and it was this overwhelming sense of dissatisfaction with the stats quo that changed the political scene in America.
So by all past traditional measurements the bottom has been put in place. The point of maximum negative sentiment has been reached. The voters have spoken and a new political plan has been put in place. The tide has turned, investor letters and financial blogs say we are at or near the bottom. All the traditional Points of Maximum Pessimism have logically been satisfied and the common knowledge is to buy these bargains. This is the point where each investor must rely on his own experience and judgment to make the call to return to the market.
Just remember one more old adage: "The average investor is always wrong."
